Growth continues to slow in manufacturing sector

Supply chain pressures easing but sector still suffering capacity constraints, AIB index shows

Activity in the manufacturing sector is growing at the slowest rate since March, according to an index maintained by AIB. However, the bank says the sector is still performing "strongly overall".

The bank’s manufacturing purchasing managers index (PMI) for December showed that production was up for the tenth month in a row but the rate of growth has slowed in six of the last seven months, after hitting an all-time high in May.

AIB said manufacturing exports from Ireland remain “subdued” during the pandemic. But it said some supply chain pressures were weakening and inflation in some input costs were beginning to ease. However, manufacturers are still passing on stiff price increases to their customers.

‘Ongoing pressure’

"Capacity constraints are still very evident in the sector," said Oliver Mangan, the bank's chief economist.


“Backlogs of unfinished work continued to rise sharply. The delivery times for inputs also lengthened again, reflecting the ongoing pressure on supply chains. Not surprisingly then, firms saw a marked rundown in their inventories of finished goods.”

He said the combination of strong demand, continuing disruptions to supply chains and sharp upward pressure in raw materials, energy and transportation costs, resulted in a further “marked increase” in input prices.

“Manufacturers, though, are passing on these higher costs to customers, with output prices continuing to rise at a rapid pace, increasing at the third-fastest rate since the series began in 2002,” he said.

Mark Paul

Mark Paul

Mark Paul is London Correspondent for The Irish Times